MarketMinder's View: “Americans increased expenditures by 0.4 percent in July, double the increase in June, thanks to a four-month high in income growth.” What happened to the expected collapse in consumer spending due to housing woes?

MarketMinder's View: Funny how folks barely pay attention to inflation now that the supposed “credit crunch” is here. Just a couple months ago inflation was the number one worry— my, how quickly sentiment changes!

MarketMinder's View: Average house prices INCREASED 3.2% on a year-over-year basis. Remember housing markets are highly regional—funny how the media usually only reports on the bad areas these days. In sum, things are fine.

MarketMinder's View: While government intervention is usually a solution in search of a problem, this is no big deal. The fine print of this plan—should it be implemented—involves a very small segment of the housing market and isn’t likely to meaningfully affect the situation one way or the other.

MarketMinder's View: Bernanke suggests politicians should “encourage a wider range of mortgages geared for low income and other borrowers” rather than regulate such people out of potential homeownership. We think this is a grand idea! We hope politicians will opt for free markets over regulation.

MarketMinder's View: Why are CEOs and hedge fund managers their only targets? Don’t professional athletes make a ton of money too? What about Tom Cruise? How about Paris Hilton? Doesn’t Paris Hilton “concentrate wealth” and “corrupt democracy” too?

MarketMinder's View: A warning to politicians favoring increasing government regulation as means to make American wealth distribution “more fair”—France now faces an uphill battle to unwind centuries of economy-squelching policies and culture.

MarketMinder's View: A look at why “deregulation” in electricity hasn’t worked but has been a huge success for banking, trucking, and airlines. The answer is easy: “Deregulation of some parts of the system was offset by more ambitious regulations elsewhere.” Government meddling leads to unintended, and usually negative, consequences.

MarketMinder's View: Wrong. Check history. Periods of flat or declining home prices have actually been followed by positive and above-average stock returns 6, 12, and 24 months later. And, lower home prices are GREAT for home buyers!

MarketMinder's View: Articles like these are based on some weird, mercantilist notion there’s a fixed amount of wealth in the world, and money is being diverted from kindergarten teachers to fund the outsized salaries of rich jerks. But that’s not the way the world works. The solution is easy—if you don’t like it, you don’t buy their stock.

MarketMinder's View: No! NO NO NO! Variable annuities are never—not ever—appropriate for high net worth investors. And putting a tax-deferred vehicle in a tax-deferred account is the height of insanity! Variable annuities are good for the broker and insurance company selling them and no one else. If you get nothing from MarketMinder besides learning to never buy a variable annuity, we have fulfilled our duty to society.

MarketMinder's View: A market-based solution. We’ve seen evidence of it already as banks, voluntarily, have tightened lending standards. Government “rescue” problems cause exponentially more harm than good.

MarketMinder's View: “Care to guess the highest level to which the Conference Board's consumer confidence index has risen in the last 20 years? That's right: It was in January 2000, just weeks prior to the popping of the Internet bubble.” Consumer confidence is useless in stock predicting.

MarketMinder's View: MarketMinder readers know that the deficit is not negative for stocks by itself, but for those claiming that that the economy is faltering should look no further than the booming tax revenues shrinking the deficit for proof that economic growth remains strong.

MarketMinder's View: So, consumer confidence hasn’t been this low since right before the stock market shot up for two years straight? Ignore consumer confidence—it’s backward-looking and not predictive.

MarketMinder's View: We’re a tad confused why this article has a negative tone. Apparently, more people can afford to become homeowners: “43 percent of all homes on the market are affordable to local residents earning median household incomes, up from 40.6 percent a year ago.” Aren’t more affordable homes good news?

MarketMinder's View: A panel of business economists think mortgage defaults now pose a greater risk to the economy than terrorism? Considering we never thought terrorism posed much threat to the economy in the first place, who cares? (Before you think we’re insane, see MarketMinder commentary “Terror’s Toll,” 07/02/2007.)

MarketMinder's View: History’s lessons are vital for putting today’s investing landscape into context. Understanding how today is similar or different can put you on the right track to making smarter investment decisions.

MarketMinder's View: Oh oh. Someone needs to check their history. The last recession ended (according to the National Bureau of Economic Research) just after 9/11. Awkward. Or maybe, they’re trying to threaten us with continuing robust economic growth? Seems odd.

MarketMinder's View: Given that stock markets are discounters of all widely known information, we love to see stories like this because it means other people are worrying about the issue so you don’t have to.

MarketMinder's View: “The only really big danger in the current crisis is that we overreact to it. That in our panicky reaction to an inevitable fear of the inevitable, we insist on new regulatory burdens for our markets.” Very well said.

MarketMinder's View: A classic (and faulty) extrapolation of a small subset of the economy to the broader economy. Amid the supposed housing and subprime chaos, unemployment claims actually fell in the most recent period.

MarketMinder's View: Yep, some hedge funds got hurt with too much leverage. Sometimes you get the short end of the stick in games of high risk and return. Now wipe your eyes and take a clear look at the broader, robust economy. You’ll see that defunct hedge fund losses are a miniscule part.

MarketMinder's View: The Chinese government is slowly opening its capital markets. Chinese citizens can now invest internationally. However, an influx of new Chinese capital into global equity markets won’t destabilize anything—this is a small thing but a good thing nonetheless.

MarketMinder's View: “The enemy of the efficient functioning of the markets is emotion. When you have fear and panic, markets don't work. A regulator does have a duty to not let panic or emotion hurt the market.” Um, sorry, but fear and panic have always been part of free markets and always will be. The idea that we could (or that we’d even want to!) magically regulate away human nature is patently absurd.

MarketMinder's View: At first blush, you might think these were headlines from 2004 (housing’s go-go days). But no! This is happening today. Housing has fallen on tougher times, but there’s no implosion.

MarketMinder's View: Um…no. Americans work fewer hours than developing nations’ workers because we’re the most productive work force on earth. As for developed nations, check out what business is like during a “siesta” in Spain or a soccer match in Italy or anytime in France and try telling us we’re lazy.

MarketMinder's View: What? No! Call it what you will—cap and trade, carbon tax—it’s government intervention in business and will reduce efficiency, productivity, and opportunity. Wealthier nations can afford innovating on greener technologies—government intervention takes away incentive to innovate. For evidence, please see Air Pollution, Communist China.

MarketMinder's View: You say tomato, I say credit crunch. It’s hard to take any of this seriously when credit spreads are narrowing again from a mini-spike—the magnitude of which we’ve already witnessed this bull run. It didn’t derail the market or economy then, likely won’t now.

MarketMinder's View: Weird. Or, you can interpret four banks tapping the Fed for loans this way: The Fed made money cheaper, so why not take advantage? It’s not proof of disaster, it’s evidence that money remains cheap and easy.

MarketMinder's View: Rate cuts won’t cure the so-called credit crunch, because there is no legitimate, system-wide credit crunch. Corporate borrowing rates (BBB) have been below their ten-year averages during the entirety of this “crisis.” Below-average borrowing rates? How is that a credit crunch?

MarketMinder's View: Yes, they fell, but “the four-week moving average for the overall mortgage applications index rose 1.3% to 645.8.” Either way, it doesn’t matter much for the stock market. Historically, home sales have not been predictive for stock performance.

MarketMinder's View: How is this even possible? We’ve been reading for the past month that takeovers are done, forever, because of the “credit crunch.” Hmm. Maybe those headlines weren’t exactly right.

MarketMinder's View: Indeed. “…the scale of the real problems in the US mortgage market, though large in nominal terms, are still only a small fraction of the total housing sector, let alone of the broader US economy.”

MarketMinder's View: A mortgage company focusing exclusively on the prime mortgage market has seen its shares rise 21% in the past month due to strong performance. Considering that prime mortgages are by far the majority of loans, shouldn’t this tell us something?

MarketMinder's View: “Every market crisis needs a scapegoat.” Well said. No amount of finger-pointing can change the fact that volatility risk is inherent to any freely-traded market, and investors must assess that risk to determine if it’s appropriate given their goals.

MarketMinder's View: Very well said, and it doesn’t just apply to Canada: “…the unprecedented expansion of access - to goods, services, ideas and opportunities - is the primary driver that has created profound and positive change for nations, businesses and individuals around the world…”

MarketMinder's View: “Poll of 1,000 consumers finds nearly half are worried about credit, subprime problems but unsure how it affects them.” A classic sign of a correction driven by unwarranted fear of something misunderstood.

MarketMinder's View: “Hence, it seems that a wide range of fundamentally sound assets have suffered out of proportion as markets have been gripped by fear." In other words, this is a psychological sell off with little in the underlying economy to suggest an aggressive rate cut is imminent.

MarketMinder's View: Risk never left!! Corporations and individuals have been able to borrow at low rates over the past few years because corporate balance sheets and earnings remain strong while unemployment has been low. In fact, this remains true today.

MarketMinder's View: “We succeeded in getting rid of communism, but we erroneously assumed that attempts to suppress freedom were matters of the past.” From someone who knows a thing or two about the lack of freedom.

MarketMinder's View: So borrowing costs have increased slightly but housing prices have declined. Doesn’t this mean you can deduct more interest from your taxes but on a smaller loan for the same house?

MarketMinder's View: We didn’t bother reading past this subtitle “Bear Market Rallies Are the Most Violent.” What does that even mean? A bear market rally? How is that possible? We’ve been in a bull market for the last five years. How can you have a bear market rally in the middle of a bull market? Ignore.

MarketMinder's View: Bear in mind, today’s Fed action was largely symbolic. (Why would a bank borrow from the Fed at 5.75% when they can borrow from each other at 5.25%?) Rate moves of this sort are perfectly normal—a central bank managing liquidity through some market jitters. We see nothing alarming here, nor would be much fussed by continuing tweaks.

MarketMinder's View: Housing problems? Weak US consumer? We seem to remember hearing this story before. Oh right, it’s been talked about for years! If everyone is talking about something, it’s more than likely either wrong or already discounted into stocks.

MarketMinder's View: Don’t worry about one-day moves – equities are not serially correlated. But we have to wonder how many people turned off their televisions mid-day in disgust just before the market rallied back.

MarketMinder's View: Despite subprime market woes, note that the prime market for lending has yet to be affected. According to the article, 30-year fixed prime rates (the most common type of mortgage loans) are averaging 6.62%, only slightly above last year’s 6.52%.

MarketMinder's View: A great piece on the difficulties of scaling and the impact of the current problems with subprime. On a side note, it’s good to see the reference to Ferris in our Commentary “Free Markets...Anyone? Anyone?” is gaining traction.

MarketMinder's View: Although fleeing to Treasuries is the wrong decision during a bull market correction, this demonstrates the value and stability investors worldwide see in the United States. You’ll notice few feel it wise to purchase Chinese debt in quest of greater assurance.

MarketMinder's View: Municipal Wi-Fi networks are experiencing cost overruns while falling short of performance expectations. Again, we must ask: Who thought it was the government’s business to provide internet service in the first place?

MarketMinder's View: Whether a stock is trading at its 52-week high or its 52-week low is useless information. Stock prices are not serially correlated. Period. A stock’s historical performance gives you no indication of future price.

MarketMinder's View: “Confidence among some of the world’s business leaders has slumped to its lowest level since the third quarter of 2002…” Heaven forbid we see more of the five year bull market that began right around the 3rd quarter of 2002! As we mentioned in yesterday’s commentary “Bearing with Bulls”, there is little euphoria today.

MarketMinder's View: Yes, stocks are still positive despite the pullback, but you shouldn’t focus on past performance. Fundamentals are strong, the global economy growing, earnings surprising to the upside, and stock supply still being reduced. It’s a fine time to remain bullish.

MarketMinder's View: We’ll go out on limb and say that no one will remember yesterday as “Terrible Tuesday.” Heck, the market experienced a bigger drop on Tuesday, February 27th of this year and it neither derailed the market nor received a gimmicky nickname.

MarketMinder's View: What has been missed by much of the press is that problems with subprime are a very small portion of the overall mortgage market and an even smaller portion of the total credit market.

MarketMinder's View: There’s a fine line between a “bail out” and an “investment.” We doubt anyone invested in Goldman’s fund for altruistic reasons—someone saw an opportunity. Don’t be surprised if this “bail out” pays off once markets stabilize.

MarketMinder's View: It’s ironic that the title of the column is “Contrary Indicator” and yet spells out exactly what everyone else is saying - this is all showing signs of a normal well-publicized correction.

MarketMinder's View: This is how innovation happens—you don’t have to be in the healthcare business to improve healthcare…all you need is an incentive based, free market environment, and the rest takes care of itself.

MarketMinder's View: Lots of good stuff in this one: “Heck, we're under-leveraged as a country right now and should probably take on more debt…Housing prices are down 1 per cent year-over-year, after almost doubling in the past five. So, please, before you jump out the window and hit the quant traders on the sidewalk, note that this ‘crisis’ in the stock market has little to do with housing.”

MarketMinder's View: Here’s the thing: we need Lamborghinis (hedge funds) in financial markets—they’re the speedsters that innovate and help develop capital markets. Just because the high risk-takers sometimes crash and burn doesn’t mean the economy will go with it.

MarketMinder's View: The “meltdown” in 1998 was a correction, just like what we’re likely witnessing today. Here’s hoping this year is exactly like 1998—a year US stocks finished a net positive 29%! (For more, read MarketMinder commentary, “Pray for Panic,” 8/10/07)

MarketMinder's View: A rational look at the subprime meltdown. “When the dust settles, the market for subprime mortgages will revive and thrive in dull obscurity. With financial innovation, it was ever so.”

MarketMinder's View: Foreigners don’t hold US Treasuries out of the kindness of their hearts. They invest in America because they perceive opportunity here. Dumping US Treasuries would hurt China as much or more than it would hurt the US.

MarketMinder's View: "Nobody likes stiff stock market corrections. But if folks step back a bit they’ll see the many positives -- the jobs, the incomes, and the profits -- that will carry us through this difficult period.” Well said.

MarketMinder's View: Central banks injecting cash into the system is not proof of systemic problems. Newsflash: Managing liquidity is what central banks do, and they frequently use a variety of methods to inject liquidity—it just normally doesn’t make the headlines. (See MarketMinder commentary “Bloody in the Alleys,” 08/09/07.)

MarketMinder's View: Wrong wrong wrong. Backward-looking finger-pointing is very typical of a correction. Our economy is healthy and the aggregate credit market is just fine. When this shakes out, “credit crisis” fears will seem as silly as February’s yen carry-trade fears seem now.

MarketMinder's View: Huh? The sporting equivalent of this question might be “Should the Yankees let other teams win more often?” No! How about letting each institution decide for itself the most appropriate means of maximizing risk and return within a free market?

MarketMinder's View: While fuel efficiency standards haven’t changed in decades, fuel efficiency in autos has dramatically improved of its own accord, and without increased regulation. Amazing what free markets can do, isn’t it?

MarketMinder's View: Failures are natural in any market environment and the losses, while seemingly large in absolute numbers, are relatively small in comparison to the overall credit market. See our commentary “Blood in the Alleys” for more.

MarketMinder's View: How could this possibly have made it into our stories of interest, you ask? Because it’s a wonderful illustration of the fear and emotion dominating sentiment today. Misplaced fear and worry are very bullish.

MarketMinder's View: Unusually hot summers? Are they kidding? Trade balances and federal debt absolutely do not determine relative strength of a nation’s currency. The US has run a big trade deficit for 25 years, but we’ve had periods of both a strong and weak dollar. Ignore all this.

MarketMinder's View: That the Fed remains focused on managing inflation rather than bailing out a relatively small portion of the mortgage market is encouraging. Just because a few rattled souls are screaming that this is “Armageddon” doesn’t make it so.

MarketMinder's View: A $99 desktop computer! Whatever the problems with it, it is surely light years ahead of computers we used 10 years ago. See the column “Let Free Trade Take Its Course” for more on free trade’s contribution to technology innovation.

MarketMinder's View: Subprime is a good thing. That’s right, we said it. It may be a more volatile and risky part of the mortgage market than others (and thus susceptible to downturns like we’re seeing today), but it’s also an invaluable tool for lending to folks who otherwise couldn’t own a house and a profitable component of some investment portfolios with large debt allocations.

MarketMinder's View: “Federal Reserve Chairman Ben Bernanke refused to give a jittery Wall Street what it was looking for on Aug. 7—a promise of easier money.” Really? Judging by the market’s reaction yesterday and today—seems like the market is just fine with the Fed’s decision.

MarketMinder's View: First, government mandates on ethanol spikes corn prices leading to higher prices on a wide spectrum of food prices. Now, “organic” foods cause global warming! Instead of forcing “healthy” foods and allegedly environmentally safe alternatives, why not let a free market sort out what we eat and how we power our world?

MarketMinder's View: The Fed did not come to the market’s “rescue” yesterday because the market didn’t need rescuing in the first place. See our commentary, “No Credit Messiah Necessary” 8/6/07 for more.

MarketMinder's View: “Both global growth and corporate profitability remain in very robust form. The majority of companies have buoyant cashflow and have built up ample capital on their balance sheets to fund continuing investment.” We agree!

MarketMinder's View: “Few?” If our powers of deduction are correct here, almost three times as many homeowners think their home value will appreciate rather than fall next year. Homeownership does not qualify one to be a real estate market analyst anyway. Ignore.

MarketMinder's View: Corporate tax structure has become a bane to US competitiveness. Europe and Asia have lowered and simplified taxes consistently in recent years. Overhauling US tax rates has become a priority for the Treasury Department. Let’s hope they succeed.

MarketMinder's View: Folks who have been predicting declines for years feel vindicated during pullbacks. Don’t let this worry you – pullbacks and full-blown corrections are very normal and healthy for markets.

MarketMinder's View: We agree with the premise: employment is generally a lagging indicator of economic health. But we’re not buying the idea US consumers are tapped out—they’re cash-rich, liquid, and likely to continue spending for some time to come.

MarketMinder's View: Into the fifth year of a bull market, news of Wall Street corruption is still a front page headline. Skepticism of executives and analysts is bullish. With no euphoria in sight, markets have further to climb.

MarketMinder's View: “Until a trend is clear, expect the market to continue to swing wildly as investors place bets on their fears, real or imagined, of a US recession.” OK, but we really have to ask… when, ever, has a trend been clear to investors? There’s always uncertainty in stock investing—especially in bull markets.

MarketMinder's View: Mind you, mortgage rates are still under historical norms. When the dust finally clears, this is more likely to be revealed as a period of softening in housing rather than a collapse.

MarketMinder's View: The distinction between those defaulting on sub-prime variable-rate and fixed-rate is an important one. The fixed-rate and prime mortgages are holding steady. This is a reason why it’s unlikely this will spill over into the prime mortgage market.

MarketMinder's View: This serves as a good example of how to look at traditional economic measures in a new way. Times continually change and what was once sound data can easily become irrelevant. There’s only one flaw: trade deficits aren’t inherently bad….

MarketMinder's View: If one good thing comes out of high oil prices and worries about CO2 emissions, hopefully it will be the revival of America’s nuclear power – the most efficient and clean form of energy ever created.